May 27th, 2017
Budgeting is one of the best practices you can use to effectively manage your household spending. Here are 8 Reasons Why You Need A Budget.
1) Order in the House (The Fundamental Importance of Budgeting)
One of the primary reasons you need a budget is to create a blueprint or a structural foundation to put your financial house in order. A budget gives you a sense of your financial priorities and your hard earned money a sense of purpose. Without having a budget, your money habits could become chaotic, which can impact the entire household not to mention the “state of your union.” Another big reason you need a budget is to help keep your household focus on its priorities and reduce unnecessary stress.
2) Who’s controlling whom?
Do you control your money or does your money control you? That is the question. A budget can provide you timely and important insights about your spending. By taking a quick inventory of your spending habits you can learn a lot about yourself and make adjustments when necessary. A budget helps keep you in the drivers seat. Make sure you are controlling your money, as opposed to the other way around. After all, you cannot make life decisions about your finances if you have no control. Don’t ever be at the mercy of your money.
3) Got my mind on my money and my money on my mind
The third reason you need a budget, is because it helps disciplines our socio-psychological relationship to money. We all have socio-psychological relationship to money. Whether we have little or a lot we measure our lives and our standard of living by how much money we have or don’t have. Overall, our obsession with money is ongoing and often moves between our wants and needs. Budgeting can help keep us focused on our needs as opposed to our wants.
4) Establishing financial discipline
The fourth reason you need a budget is because it can help you manage your money more effectively. It can help you build a strong base for your financial future. If you’re trying to build financial security there is very little chance of you getting there without understanding how to budget. Having and using a budget helps you establish that strong sense of financial discipline.
5) Planning and Goal setting
The fifth reason you need budget is that it helps you to establish and achieve financial goals. By constantly reviewing your monthly financial picture you learn how best to approach you personal financial goals. You also learn what may be the best steps to take in realizing those goals. Without having any idea about your personal finances, it is very difficult to plan and execution on strategies toward goal achievement. Having a budget is very key to planning and goal setting.
6) Review and Manage expenses
Reason number six is that budgeting helps you to clearly define your expenses, whether they’re fixed, variable, monthly, quarterly or annual. Managing expenses is one of the key problem areas for many households. A budget is the ultimate tool which provides much needed insight on your expenses as you deliberate on key financial decisions.
7) Pennies add up
Having a budget brings with it an understanding that everything adds up. Remember the old cliché, “a penny saved is a penny earned.” The truth is small purchases add up, small fees add up and small savings add up as well…bottom line is everything adds up. Making sure you’re on the right side of the addition formula. And that you are clearing making the is our seventh reason to underscore the importance of budgeting.
8) It’s a family affair
And finally, the eight reason you need a budget is because it has enormous impact on your family, particularly over time. Budgeting makes a difference in terms of day-to-day living, saving for college, purchasing a new home, automobile or saving for retirement. Make it a group effort. Although budgeting may be seen as a bit restrictive for a family in the short-term, it can be super beneficial in the long run. In terms of engaging the family, make it fun. Provide incentives for cooperation –such as a movie night, or pizza night or ice cream night—you get the point. This may be a good way to involve the fam, but just make sure that you account for those cool incentives, in your budget.